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Homepage Updated: 10/2/07

Disney Vacation Club (DVC) for UK Purchasers

Introduction
The intention of this thread is to give interested
readers an insight into the Disney Vacation Club (DVC),
Disney's US based time-share operation, in order to
help readers to decide if DVC is for them.

It is not a substitute for doing your own
research  it is up to everyone to reach their own
decision, and what is right for one person is not
necessarily right for others. Nor is it intended to
promote timeshare ownership  the decision is down
to each individual.

DVC does not suit everyone but its members are
generally very, very happy with their purchases. If
you are thinking about DVC, I would urge you to
search this forum for DVC comments.

DVC membership should not be seen as a means of
making holidays to WDW cheaper  whilst I believe
DVC offers good value to its members (and you will
have to read below to see if this means for you too)
if you are happy to stay off-site or in Disney's
Value Resorts you can do so cheaper without joining
DVC. What DVC does is provide good quality (deluxe)
accommodation to its members.

DVC should not be seen as an investment, rather it
is a means of ensuring great holiday accommodation.

DVC will not necessarily mean cheaper holidays, as
the cost of the flights etc. may be more than the
cost of a hotel included package holiday HOWEVER it
does give you quality.

The cheapest way to get into DVC is through the
secondary or resale market, but the easiest method
is to buy direct from Disney.

In this thread we will be giving example
calculations based on prices at June 2007. You will
need to amend these to current prices at the time
you are considering your purchase.

Locations
DVC is predominantly located on-resort at Walt
Disney World, Florida. The resorts are Old Key West
(OKW); BoardWalk Villas (BWV); Beach Club Villas
(BCV); The Villas at Disney's Wilderness Lodge (VWL);
Saratoga Springs Resort (SSR); and Animal Kingdom
Villas (AKV). SSR and AKV are the resorts
presently on sale by Disney. It is speculated that
these will be followed by a DVC resort as part of
the Contemporary Resort. Away from WDW there are two
further DVC resorts  one at Vero Beach (VBR) on
Florida's Gulf Coast, and one at Hilton Head Island
(HHI), South Carolina.

OKW is the cheapest of the on-site resorts to buy
into. SSR (2054) and AKV (2057) have longer terms
than the other resorts (2042) but IMHO this is not
much of an additional benefit (based upon a cursory
discounted cash flow analysis). (Plans are also
currently afoot to increase the term of OKW by 15
years by payment of a fee, which if successful could
be rolled out to other resorts - check out separate
threads on this.)

Each resort has its own attractions:-

OKW has larger rooms than the later resorts and is
well located for Down Town Disney ("DTD"), with a
ferry service to DTD.
SSR has a spa and is located even closer to DTD so
you can walk there.
BCV is located within walking distance of EPCOT and
MGM, and has the best pool.
BWV is located opposite BCV and enjoys the same
great location but not the pool of BCV.
WLV are a Magic Kingdom resort.
AKV is part of the Animal Kingdom Lodge complex.
Vero Beach and Hilton Head are beach resorts.

Points
DVC is a points based Time Share system. This means
that rather than buying a fixed or floating week
(as at traditional time-share resorts), you purchase
points (the minimum holding is 150 points) which are
exchanged for accommodation on a nightly basis. DVC
accommodation varies between the DVC resorts but
typically covers Studios, One-Bed, Two-Bed, and
Grand Villas. The number of points you need to stay
at any resort depends upon the size of the
accommodation; the season (Adventure / Choice /
Dream / Magic / Premier); and the day of the week 
Sunday to Thursday require less points than Friday
and Saturday. Importantly, the number of points
required does not change from year to year  the
only thing which changes is the dates of the
Seasons.

Points are interchangeable between resorts. This
means you can, for example, book a 56 point stay at
OKW with 56 points from VBR. You can book stays at
your Home Resort from 11-months in advance. You can
book stays at other resorts from 7-months in
advance. At busy times it is possible that the
resort you are looking to book in to is fully booked
at the 7-month stage.

If you are limited to going at specific times you
should buy into the resort you want to stay at; as
owners at home resorts can book accommodation 11
months in advance  non-home resort DVC members can
book 7 months in advance (which means the dates you
want may already be gone).

The points have a capital cost, the price you pay up
front, and an annual maintenance cost (like a
service charge on a leasehold property).

How many points?
Only you can work out what our accommodation
requirements are going to be - if you are looking at
taking family a Studio may be too small. We assumed
that we would be going every 3 years on a Yr 1 bank/
Yr 2 use/ Yr 3 borrow/ Yr 4 bank/ Yr 5 use/ Yr 6
borrow etc. cycle and got sufficient points for a
2-bed (230). Many users check-out of their DVC into
other accommodation for the Friday and Saturday
nights to extend their DVC usage (an ideal
opportunity to stay at Universal for FOTL access
perhaps?).

IMHO DVC points should only be used for staying at
DVC if you want best value from them. Whilst you can
swap elsewhere, it is IMHO an expensive means of
doing this, and opinion is divided. In a recent
example (on another Board), another DVC owner held
up the benefits of exchanging because of a stay at a
one bedroom at Marriott's Desert Springs II resort
in California, which cost them "just 124" DVC
points. IMHO if you want to stay at Marriott's (or
indeed at any other non-DVC resort) the best thing
to do would be to buy Marriott  (I am a Marriott
owner). You can then use this to exchange to other
Marriott resorts through Interval International
("II"), or any other II registered timeshare resort.
II - which is the world's no.1 timeshare resort
exchange company and is the one which provides the
DVC exchanges  is owned by Marriott.

An extra benefit of owning outside DVC is that you
can become an individual member of II (indeed you
have to). This enables you to book unlimited "Late
Getaways".

Using Marriott's Desert Springs as an example, I
could book 3 weeks there in a 2-bed apartment for
£149 a week. This is without touching my purchased
Marriott week. This compares to exchanging 124
points for a one bed where you have paid premium
price up front, and have paid say $4 a point for
maintenance.

So the maths would be do I exchange 124 DVC points
worth 124 x $4 = $496 say £260 or do I get a larger
apartment through II on a getaway for £149? In fact
to allow for the purchase premium the 124 DVC points
should be priced at their rental value - $10-$11,
say $10 to keep it simple. Do I pay 124 x $10 =
$1,240 (£650) or do I pay £149? It's a no brainer
IMHO.

Resale
Legally DVC points are a real estate interest so
there are only a fixed number which can be sold per
resort. Once this limit is reached the resort is
sold-out and no new points can be created. At
present SSR and AKV are the only resorts for which
new points can be bought. Other resorts are
sold-out, so points in them are best bought resale
(i.e. from existing owners) although they may also
be available from Disney through repossessions or
exercise of its Right Of First Refusal.

Capital (or Purchase) Cost
If we assume that you want 160 points (the new
minimum holding  was 150). If you buy this from
Disney, SSR and AKL presently cost about $101 per
point, but the process is easier and you might
receive incentives, be sure to ask.

If you were to buy in the secondary market you could
get points for say $70. This $70 would include the
brokers commission, so it is reasonable to assume
that you could sell it for $60 (allowing for say $10
per point brokers commission). Allowing for $5 per
point in closing costs, you would be paying $75.00
per point for something which you could sell for
$60.00 a point. In other words the "Goodwill"
element or true cost of your DVC would be $15 x 160
or $2,400.00. (You would need to add on the interest
cost of the total purchase price - if borrowed - or
the opportunity cost, if using savings too. This
will vary from person to person so is up to you to
determine.)

Seen like this it looks quite reasonable If
something untoward were to happen in the future and
you had to sell your DVC points, that $2,400 is the
"loss" you would make. You probably lose more in
depreciation on your car each year.

(If you are buying direct from Disney closing costs
are minimal (say $160  or $1 per point) but the
true value of the points remains what you could sell
them for if you needed to  say $60.00 per point in
the above example. So, the Goodwill element would be
slightly higher at 160 x ($102 - $60) = $6,720.)

As new DVC points climb in price each year, the
resale value of existing points should rise too -
perhaps not as fast, but its simple supply and
demand. So, say over 5 years new DVC points climb
$20.00 - it is quite probable that existing points
would climb $10-$20 also, which would mean that when
new points are for sale at $121.00, you might have
recouped your "Goodwill" outlay and be able to sell
your points for about what you paid for them. Seen
like this you could recoup your outlay in as little
as 5 years but this is in no way guaranteed.

At some future point in time, when there are 25
years left to run on the initial DVC leases, you
will have to start depreciating the value of your
investment - but that's some time off. (Depreciation
is an accounting term for reflecting the reduction
in value of an asset over its expected life.) In the
meantime just enjoy that quality accommodation and
happy holidays.

Maintenance Fee
As well as the initial purchase price of the points,
you will need to pay an annual maintenance fee. This
varies between resorts and will vary from year to
year. Lets assume its $4 per point per annum. This
will increase from year to year. The maintenance fee
for SSR and AKV (and other new resorts as and when
they come up for sale) is subsidised by Disney
whilst the resort is being sold  so is likely to
increase thereafter. Maintenance fees IMHO are the
real cost of DVC.

Most DVC points have a life to 2042  36 years time.
At present prices of $4 per point on average, a
holding of 160 points will cost you $4 x 160 x 36 =
$23,040 in present terms over the life of your
points. For this reason it is as important to
consider the on-going maintenance cost, as it is the
initial purchase cost.

Assuming $4 per point maintenance costs, with 160
points you will be paying $640.00 per year on top of
your initial outlay. To work out the true value of
this you need to look at how much it would cost you
to stay in that (or similar) deluxe accommodation
otherwise.

Be careful of using holiday brochure prices for
comparison. More realistic is the market price of
renting DVC points from/to other users which is
$10-$11 a point. If we say $10, and assume a night
in a studio is 10 points; the value of that night is
$100 (10 x $10)  even if the rack rate is $250.

So . assume 160 points would get you 16 nights in a
studio at 10 points per night. You would be paying
$640 in maintenance fees for those nights. $600
would be sufficient to stay 6 nights by renting DVC
points from existing owners, so the true benefit of
ownership and of your initial outlay is the extra 10
nights which you have effectively paid for in your
initial purchase.

That's a simple example  many people calculate that
they need, say, 420 points to stay where and when
they want, and are put off by the large maintenance
fee of, say, $1,680 which would pay for a villa
etc., but the principle is the same  just do the
maths.

Renting DVC Points
As well as renting points from other owners for your
use, you can as an owner rent your points to others
to use. DVC points presently rent for $10-11 per
point. This too is IMHO likely to increase over
time. Assuming $4 per point maintenance charge, and
$10 per point rental income, you could rent your 160
points for $960 profit per annum should you wish.
For many this could IMHO be a better option than
exchanging to non-DVC accommodation..

Comparing the cost of DVC with staying in a
Villa.
As I said above, DVC is not intended to be a way of
doing Florida on the cheap. Many people prefer to
stay offsite in villas. The following compares the
cost of DVC versus a villa.

Whilst there is no guarantee that they will continue
to do so, DVC points have historically increased in
value each year. (Aided by Disney managing the
market by exercising its Right Of First Refusal (ROFR)).
If you assume by $2 per annum. After 10 years your
DVC points will be worth $85 per point. You could
therefore sell them for 160 x $85 = $13,600  a
paper profit of $1,600.00.

Assume maintenance costs increase at the same rate
as inflation on villa costs. So, you can regard 1
week of villa hire as equalling maintenance fee, so
just disregard both and look at the cost of the 2nd
week.

Assuming 3% inflation, in 10 years time that same
week will cost you $782 per week.

Over those 10 years you will have spent you will
have spent $7,337 on that week. That money will be
gone.

Whereas with DVC you will have paid $12,000 up
front, however, you could then sell those points for
$13,600.

So, the true cost of DVC would be the interest cost
of borrowing the $12,000 originally, or the
opportunity cost of not investing it if you didn't
need to borrow the money.

Another significant factor, which could go either
way, is changes in foreign exchange rates. When you
buy in to DVC you know how much £ you are spending.
If £1 falls to say $1.50 by year 10 your week in the
vi11a is costing you $835 = £557 versus $640 @1.98 =
£323 per week now HOWEVER your DVC was still set at
your original rate, so your original DVC cost of
$12,000 cost you £6,060 HOWEVER after 10 years the
points are worth $13,600 which at $1.50/£ = £9,066
so you would have made over £3,000.

Alternatives
DVC is a premium product, so before buying DVC I
would recommend that you look into off-site
alternatives which might meet your needs for less -
notably Marriott, and Hilton. IMHO its worth joining
the Timeshare Users Group (www.tug2.net) for general
unbiased opinions on timeshare.

US Tax on Sale
The above explanation does not take into
consideration the impact of US witholding tax upon
US Non-Residents. Under federal legislation called "FIRPTA"
(the Foreign Investment in Real Property Tax Act)
non-US resident sellers of US Real Estate interests
(which DVC and other timeshares falls into) have to
pay 10% of the sale price to the US tax authorities
as a form of witholding tax. I believe that this is
reclaimable but it involves some form filling and
procedural issues (e.g. swearing an affidavit before
a US Notary which seems in practice to require a
visit to the US Embassy). I do not wish to go into
detail on it here but just to raise awareness of it.
Timeshare Resale Agents should be able to advise
appropriately should it be necessary. In the
meantime you can find out more info here, here, and
here.

Conclusion
The best reason to buy into DVC is because of the
positive experience of everyone on these boards who
has bought into DVC. The financial calculations rely
on assumptions which can be blown away by exchange
rate movements. The only regrets DVC owners seem to
have is that (a) they didn't do it sooner; and (b)
that they didn't buy more points up front. It is
that which sells DVC to me. Whilst DVC isn't for
everyone, its members love it.